In this article, we discuss 13 best consumer cyclical dividend stocks to invest in. You can skip our detailed analysis of the consumer cyclical sector and its performance over the years, and go directly to read 5 Best Consumer Cyclical Dividend Stocks To Invest In.
Consumer cyclical companies produce goods and services that are considered non-essential or discretionary, meaning consumers are more likely to purchase them when they have extra income or feel confident about their financial situation. Consumer cyclical stocks include companies in sectors such as retail, automotive, travel and leisure, entertainment, and luxury goods.
Over the past year, we've seen clear evidence that consumers have remained strong despite challenges like high inflation, increasing interest rates, and greater recession concerns. This resilience notably buoyed the performance of stocks within the consumer discretionary sector, which includes businesses offering non-essential products and services such as apparel, automobiles, and accommodations. The S&P 500 Consumer Discretionary Index ended 2023 with a total return of 42.41%, reporting one of its best years on record. In addition to the support from a strong consumer base, the stocks in this sector also gained from broader market trends that propelled the overall stock market higher in 2023. These trends included relief as the Federal Reserve signaled the potential end of its rate-hiking cycle as the year progressed. Furthermore, sector-level performance was boosted by specific issues affecting some of the largest companies within it. Amazon.com, Inc. (NASDAQ:AMZN) and Tesla, Inc. (NASDAQ:TSLA), the two largest companies in the sector by a significant margin, have both seen remarkable gains in the past year, driven by the surge in mega-cap, tech-related stocks. Additionally, both companies are considered potential investment opportunities in the field of artificial intelligence.
After experiencing robust performance in 2023, analysts are also showing a preference for the sector in the current year. Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management, stated that consumers' willingness to sustain moderate spending growth has been crucial for the economy. He suggested that this could be attributed, at least in part, to the robust labor market and notable wage increases. Based on a Fidelity report, the performance of sectors is expected to be influenced by broader economic factors in 2024. If inflation remains low and the Federal Reserve stops raising interest rates, it could be advantageous for the sector, as consumers may be more inclined to buy expensive items like cars or homes. An even more positive scenario would be if the economy avoids a recession and job markets stay robust, which would particularly benefit this sector.
The report highlighted that following the sector's strong performance in 2023, stock valuations are not as low as they were previously. However, there are still segments of the market where the firm has identified robust long-term growth prospects, and where stocks are trading at attractive prices. One ongoing area of opportunity includes certain retailers. These companies possess defensive characteristics within their business models, offering some protection in case of a deteriorating economic outlook.
Another factor contributing to the positive outlook for the sector is that certain companies within it opt to distribute dividends when they maintain a steady cash flow and have a track record of sharing profits with shareholders. Apple Inc. (NASDAQ:AAPL), The Home Depot, Inc. (NYSE:HD), and NIKE, Inc. (NYSE:NKE) are some of the best consumer cyclical dividend stocks among others that are discussed below.
For this list, we scanned Insider Monkey’s database of Q4 2023 and selected consumer cyclical dividend stocks from the entertainment, technology, retail, housing, materials, and automotive industries. These companies are strong dividend payers and have decent yields. The stocks are ranked in ascending order of hedge funds having stakes in them. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
Foot Locker, Inc. (NYSE:FL) is a retail company primarily focused on athletic footwear and apparel. It operates thousands of retail stores globally, selling a wide range of athletic shoes, clothing, and accessories from various brands. The company currently pays a quarterly dividend of $0.40 per share and has a dividend yield of 4.92%, as of February 21. It is among the best dividend stocks from the consumer cyclical sector.
At the end of Q4 2023, 24 hedge funds tracked by Insider Monkey reported having stakes in Foot Locker, Inc. (NYSE:FL), up from 23 in the previous quarter. The consolidated value of these stakes is roughly $764 million. Among these hedge funds, Vesa Equity Investment was the company's leading stakeholder in Q4.
Leggett & Platt, Incorporated (NYSE:LEG) is a diversified manufacturer that produces a wide range of engineered components and products for various industries. The company currently pays a quarterly dividend of $0.46 per share and has a dividend yield of 8.99%, as of February 21. In 2023, it stretched its dividend growth streak to 52 years, which makes LEG one of the best dividend stocks on our list.
The number of hedge funds tracked by Insider Monkey owning stakes in Leggett & Platt, Incorporated (NYSE:LEG) grew to 24 in Q4 2023, from 19 in the preceding quarter. These stakes have a collective value of over $123.6 million.
Albemarle Corporation (NYSE:ALB) is a global specialty chemicals company that develops, manufactures, and markets a wide range of products used in various industries. It is one of the best dividend stocks from the consumer cyclical sector as the company has been growing its dividends for the past 29 years. Currently, the company pays a quarterly dividend of $0.40 per share. The stock has a dividend yield of 1.39%, as of February 21.
As of the close of Q4 2023, 27 hedge funds tracked by Insider Monkey reported having stakes in Albemarle Corporation (NYSE:ALB), down from 37 in the previous quarter. The total value of these stakes is more than $311 million.
Tractor Supply Company (NASDAQ:TSCO) is an American retail chain that specializes in products for agriculture, livestock, pet care, and home improvement. On February 6, the company declared a 6.8% hike in its quarterly dividend to $1.10 per share. This marked the company's 15th consecutive year of dividend growth, which makes TSCO one of the best dividend stocks from the consumer cyclical sector. The stock's dividend yield on February 21 came in at 1.84%.
As per Insider Monkey's database of Q4 2023, 30 hedge funds in Insider Monkey's database reported having stakes in Tractor Supply Company (NASDAQ:TSCO), up from 28 in the preceding quarter. The consolidated value of these stakes is over $545.2 million.
Genuine Parts Company (NYSE:GPC) is next on our list of the best dividend stocks from the consumer cyclical sector. The company is a leading distributor of automotive and industrial replacement parts, office products, and electrical materials. On February 15, the company declared a 5% hike in its quarterly dividend to $1.00 per share. This marked the company's 67th consecutive year of dividend growth. The stock's dividend yield on February 21 came in at 2.77%.
At the end of December 2023, 36 hedge funds in Insider Monkey's database reported having stakes in Genuine Parts Company (NYSE:GPC), up from 34 in the previous quarter. The collective value of these stakes is over $535 million. With over 1 million shares, D E Shaw was the company's leading stakeholder in Q4.
The London Company mentioned Albemarle Corporation (NYSE:ALB) in its Q4 2023 investor letter. Here is what the firm has to say:
“Albemarle Corporation (NYSE:ALB) – ALB underperformed as weak lithium prices drove downward revisions to earnings expectations, and sentiment became more negative regarding demand for electric vehicles. Commodity prices are inherently uncertain, but we continue to view ALB-as a winner in this growing industry and favorably positioned on the cost curve. Our long- term view of ALB is not affected by short-term supply- demand dynamics for the commodity.”
Ford Motor Company (NYSE:F) is one of the world's largest automotive manufacturers, renowned for producing automobiles, trucks, SUVs, and electric vehicles. The company currently offers a quarterly dividend of $0.15 per share. In addition to this, it also announced a supplemental dividend of $0.18 per share on February 6, which makes F one of the best dividend stocks on our list. As of February 21, the stock has a dividend yield of 4.90%.
As of the end of the December quarter of 2023, 40 hedge funds tracked by Insider Monkey reported owning stakes in Ford Motor Company (NYSE:F), compared with 43 in the previous quarter. The consolidated value of these stakes is nearly $2 billion.
Nucor Corporation (NYSE:NUE) is an American company that operates steel mills and manufacturing facilities across the country. The company also offers value-added services such as steel fabrication and downstream processing. On February 20, the company declared a quarterly dividend of $0.54 per share, which was in line with its previous dividend. Overall, the company has raised its dividends for 51 years in a row, which makes NUE one of the best dividend stocks from the consumer cyclical sector. The stock offers a dividend yield of 1.17%, as of February 21.
Nucor Corporation (NYSE:NUE) ended the fourth quarter of 2023 with 40 hedge fund positions, up from 33 in the previous quarter, according to Insider Monkey's database. The stakes owned by these hedge funds have a consolidated value of more than $522.2 million.
Target Corporation (NYSE:TGT) operates a chain of discount retail stores offering a wide range of products including apparel, accessories, beauty products, electronics, home goods, toys, groceries, and more. Currently, the company pays a quarterly dividend of $1.10 per share and has a dividend yield of 2.94%, as of February 21. With a dividend growth streak of 52 years under its belt, TGT is one of the best dividend stocks on our list.
Target Corporation (NYSE:TGT) was a part of 58 hedge fund portfolios at the end of Q4 2023, which remained unchanged from the previous quarter, according to Insider Monkey's database. The consolidated value of stakes owned by these funds is over $1.5 billion.
